ESTABLISHING AN INTERNATIONAL NETWORKPOSITION: FINDINGS FROM AN EXPLORATORY SURVEY

OF UK TEXTILE SUPPLIERS

Rhona E JohnsenThe Business School,Bournemouth University,Bournemouth House,Christchurch Road,Bournemouth,Dorset, BH1 3LG.Tel:+44(0)1202 504217E-mail: rjohnsen@bournemouth.ac.uk

David FordUniversity of Bath

AbstractThis paper is concerned with firms that attempt to break out of their current position in theirdomestic market network. Specifically, how small suppliers in buyer-dominated relationshipsin the UK textile industry can develop an international network position. The paper draws onthe findings of an exploratory study of five UK-based small and medium-sized textilesuppliers.

IntroductionThis paper examines a problem faced by suppliers in the UK textile industry; the problem ofdeveloping new relationships and repositioning in international networks after many years ofoperating in buyer - dominated relationships in domestic markets alone. These suppliers havelimited knowledge of the process of developing new relationships and as such have beenreluctant to break ties with their current customers. Their knowledge is limited to thedomestic market whilst the competition and new customers that they face are often highlyinternationalised. Such firms have not been thinking strategically about whom they shouldinteract with and often pay the penalty of having a large and influential customer withdrawbusiness without having alternative relationships in place.

This paper looks at how small suppliers develop relationship knowledge, attempt to build arelationship strategy, and the impact that this has on re-positioning in international networks.It documents the findings of a pilot study of small and medium-sized textile industrysuppliers that examined the characteristics of relationships of these suppliers and theircustomers and the way in which these characteristics influenced their network positioning indomestic and international markets. The paper describes the way in which small suppliers candevelop an international network position by developing new customer relationships withdifferent characteristics from those with their dominating UK customers. It draws onliterature related to international network positioning, relationship characteristics andrelationship strategy.

BackgroundIn mature industries such as textiles, small suppliers are often involved in relationships withone or a few major customers on which they rely for survival. Such relationships may havebeen developed over decades, however, the length and closeness of these relationships oftenbelies the fact that they are asymmetrical in terms of control, power and influence over futuredevelopment. This adverse situation of small and medium-sized textile suppliers has arisenbecause of the power and influence of large customers which have a wealth of suppliers tochoose from and are often in a position to dictate conditions for the continuation of therelationship to their weaker, reliant suppliers, raising the threat of changing supplier if theseconditions cannot be met.

Recent trends in the textile industry have shown that UK-based retail buyers are increasinglyfocused on international sources of supply and are not prepared to support uncompetitivedomestic suppliers. The suppliers are therefore faced with internationalising quickly bydeveloping their own international supply relationships in order to placate their customers, orby seeking alternative customer relationships and breaking into new international networks.For many the development of an international supplier base causes problems as they arevertically integrated, owning their own weaving or yarn manufacturing facilities. It may beargued that for such companies the development of new international customer rather thansupply relationships would be more beneficial by enabling them to internationalise and breaktheir reliance on one or a few UK retail customers.

Despite the threat of losing UK customers, small suppliers in the textile industry may stillhave something to offer international customers. Many have learned from the experience ofadapting to dominating and powerful customers’ requirements in areas such as flexiblemanufacturing and design - responding effectively to the fashion cycle means that timing isall important in scheduling design and production according to seasonal product launches. Insuch an environment, where survival is dependent on adapting or dying, small suppliers in thetextile industry must seek to develop new relationships outside of their current experience inbuyer-dominated networks. Figure 1 shows an example of a textile industry network,highlighting the relationships of buyers and suppliers in different countries. The focus ofinterest in this paper relates to the relationship shown with dotted lines i.e. how can a smallsupplier such as Supplier A in country A establish a new network position by developingrelationships with new customers such as Retailer B in country B, and competing effectivelyfor this position against suppliers in several countries?

Figure 1. Textile Industry Network: Relationships of Manufacturers and RetailCustomers

COUNTRY A

MANUFACTURER• adapting products, processes,

technology• learning• investment• declining status as preferred supplier

COUNTRY C

LOW COSTMANUFACTURER

COUNTRY A

RETAILER• requirement placed on manufacturer to

continually develop products, processes,technology

• demands for cost cutting and efficiency• demands for exclusivity of relationship• opportunities for low cost manufacturing in

foreign markets

COUNTRY BRETAILER

STRATEGIC OPTIONS:major investment & cost cuttingto retain current positionORinternationalise developing newcustomer base and strongerposition

DEPENDENCE & LOSSOF CONTROL

POWER & CONTROL

STRATEGIC OPTIONS:support and retain domesticmanufacturers ORdevelop relationships withforeign low cost manufacturers

Literature ReviewThree main theoretical areas are reviewed in the following sections - namely internationalnetwork positioning, characteristics of relationships and the role of the development ofrelationship strategy in establishing an improved network position.

International Network PositioningThe focus of this study is firms that attempt to break out of their current position in theirdomestic market network. Specifically, how small suppliers can change their situation from adomestic to an international network position. We shall examine current strands of literatureon network positioning and assess their relevance for the study.

A network has been described as “a series of interlocking positions” (Easton, 1992), theunique position which a firm holds being influenced by the role that the firm has in itsrelationships with other organisations with which it is directly or indirectly related (Mattson,1986). Its position is defined by the role that it is seen to play in the network (Mattson, 1984)and has been viewed by Mattson (1986) from the perspective of “macropositions” and“micropositions”, whereby micropositions represent the role of the firm in its dyadicrelationships and macropositions relate to the role of the firm in the network. Macropositionsare influenced by the entirety of relationships in the network, thus the challenge ofdeveloping a new network position involves more that simply forming some new customerrelationships and may be influenced by the way other firms in the network view the firm andits role. The network position may therefore influence and be influenced by the expectationsof other actors in the network as to how the firm should behave and relate to otherorganisations. As a result it may be constrained by this position and limited in its role andrelationship to other firms in the network or enabled by its position to gain access to newresources, relationships and markets.

Recent empirical studies on network positioning have tended to examine the concept from theperspective of either retaining a current position by internationalising, or from the point ofview of developing a position in a network in one specific country. Seyed-Mohamed andBolte (1992) examined a Swedish manufacturer’s attempts to enter the US market and foundthis firm was able to establish a position by adapting to the US network and taking overanother firm’s position. Holmlund and Kock (1997) studied the internationalisation ofFinnish SMEs and suggested that a firm may be coerced into internationalisation by the needto retain or defend its position in its current network or when other firms in its networkestablish international relationships. This mirrors the situation of the UK textile suppliers butfocuses on retaining current domestic relationships rather than breaking these ties to replacethem with new types of international customer relationships. Johanson and Mattson (1992)have highlighted the connection between network position and “the means and ends ofstrategic action”. This link between strategy and positioning is important as it suggests that itis useful for firms attempting to change network position to consider how they may develop arelationship and positioning strategy.

In the next section we shall consider this link to strategy by examining the literature onrelationship strategy.

Relationship StrategyMany small manufacturers in buyer-dominated relationships are inexperienced when it comesto strategy development and implementation, by virtue of the fact that they may haveoperated under conditions where they have been implementing a component part of a major

customer’s strategy, or operating under what may be termed an “imposed” strategy. Animposed strategy occurs when an external individual or group with a strong influence overthe organisation imposes a strategy upon it (Mintzberg and Waters, 1985). These imposedstrategies may be deliberate i.e. they are deliberate intentions of one company imposed onanother over which it exerts control, and are deliberately followed by the firm which adoptsthem. Alternatively, they may be emergent (Mintzberg and Quinn, 1992); for example a smallsupplier may over time become more influenced, dependent and reliant on its large customerand be drawn into a situation where it is increasingly controlled by its customer withouthaving intended this to take place.

The imposed strategy is representative of the situation of textile manufacturers in buyer-dominated relationships which can be forced into strategic actions by forces or individualsfrom outside the boundaries of the organisation e.g. the influence of a UK retailer such asMarks and Spencer over the strategic direction of its suppliers. The firm is therefore held inits position by often long-held ties, expectations or tensions in dyadic relationships or in thesurrounding business network. These suppliers face problems as a result of being tied to suchrelationships - their strategic options may be restricted as the large buyer can control andmanipulate the resources of a small supplier, making it difficult for it to use its resources todevelop and build new relationships. The additional problem of lack of skills and experiencein building relationships and developing and implementing a strategy means that such firmsmay not possess an appropriate combination of competencies nor the confidence ofexperience to develop new customers. However, despite such problems firms can and dooften escape their past adverse relationships and achieve their re-positioning goals. As Easton(1992, p. 115) has suggested, “history determines the current position but the future offersopportunities for change”.

Most companies in business markets have to choose to interact with some companies at theexpense of others and to restrict their options for building relationships. Indeed, it may beimportant for small firms in buyer-dominated relationships to take a strategic decision aboutwhich customers they should not be interacting with, as well as those relationships that theywish to nurture and develop. When assessing their future market and customer options it willundoubtedly be necessary to identify core skills, assets, capabilities and resources that willplay a role in developing new customer relationships and opening up opportunities for re-positioning the firm in international markets with a stronger network position.

The interdependence of relationships in business networks makes it difficult for any firm todesign and implement a strategy without consideration of the impact and influences ofexternal parties in the network. However, despite such difficulties firms do make decisionsabout future markets and relationships and attempt to develop strategies based on theirexperience of previous or current relationships. In this way they may approach the future bydrawing on past experiences in business relationships. Håkansson and Snehota (1995, pp. 48-49) defined this as “manoeuvring for a favourable position” by elaborating “the experienceand thus the adoption in a company of an effective ‘relationship strategy’ ”.

Relationship CharacteristicsThe previous section has highlighted the difficulties that SMEs often face in lacking theknowledge required to develop new types of relationships with customers. The characteristicsof supplier-customer relationships are therefore important in giving small suppliers theflexibility to regain control over their strategic direction. Often the characteristics ofrelationships between small firms and their large suppliers may be negative and asymmetrical

from the perspective of the small supplier. To be able to better understand the type ofrelationships that small firms have with their customers it is important to be able to analysehow the firms relate to each other and understand the nature of the interaction taking placebetween the two parties. We shall therefore identify and describe the dimensions that severalauthors have used to describe relationships between firms and examine their relevance forthis study.

Organisational theorists such as Marrett (1971) developed dimensions that describe inter-organisational relationships. Marrett’s classification involved the dimensions of :Formalisation – the extent to which the relationship is agreed upon and made explicit.Intensity – the level of contact and resource exchange between the parties.Reciprocity – the extent to which the two parties are both involved in decision-making.Standardisation – the extent to which established roles and routines are adhered to.Ford and Rosson (1982) added the dimensions of “conflict” and “distance” to thesedimensions arising from their study of manufacturer-distributor relationships.

Relationship characteristics have been the focus of later studies by IMP researchers, primarilyconcerned with the way in which organisations relate to each other in dyadic relationships,and the structure and process of these relationships (Håkansson and Snehota,1995; Ford,1980; Ford, Håkansson and Johanson, 1986). The nature of interactions between firms havebeen compared according to several dimensions. Ford, Hakansson and Johanson (1986)focused on four aspects of interaction that are useful in describing the way in whichinteractions are at the same time both unique but also influenced by other interactions takingplace in the network.Capability – describes the relationship between the parties in terms of what they can do foreach other, involving the width and importance of the functions and the interdependencebetween the capabilities of the parties.Mutuality – describes how the parties share common goals or interests and views theinteracting parties as a social entity. It involves the extent to which a company will beprepared to give up its individual goals or intentions for the sake of the other firm and therebyincrease its own ultimate well being.Inconsistency – refers to ambiguity and lack of clarity in interaction. Interpersonalinconsistency relates to the personal expectations and individual interests influencing theinteraction. Intertemporal inconsistency relates to the differences in interaction between firmsat different points in time.Pariculiarity – refers to the complexities surrounding networks of interaction whereby theinteraction with one firm may directly influence others.

The classifications described above offer a useful guide when examining the nature ofrelationships. However they tend to paint a static picture of how firms relate to each other intheir current relationships. They do not give a view of how the firm could or should attemptto change or redirect the dimensions of its relationships or how the nature of its relationshipsmay influence its ability to change its network position. We therefore know much about thenature of relationships between firms in dyadic relationships but perhaps less about theprocess of how a firm can change the nature of its interactions with other firms with the goalof improving its position. The following exploratory study attempts to address some of theseissues.

The Pilot StudyResearch QuestionsTwo research questions were highlighted in the paper “Changing Network Position throughInternationalisation” (Johnsen and Ford, 1999) which were concerned with initial attempts tounderstand the way in which small suppliers develop new international customerrelationships and change their position in buyer-dominated relationships.

§ Can small suppliers initiate a change in their buyer-dominated network position in

domestic markets?

§ How does experience in their previous network position influence their ability tointernationalise and develop a new network position?

These research questions were the starting point for an exploratory study of suppliersoperating in the UK textile industry. They represented the initial point of departure fordeveloping research questions for semi-structured interviews with textile manufacturers. Thetwo initial research questions were broad enough to allow for further tightening of the focusof the research to be made after the results of exploratory interviews have been analysed. It isenvisaged that these results will assist in the development of a more detailed conceptualframework to be examined in subsequent in-depth case studies.

The supplier-customer relationship was identified as the appropriate unit of analysis for thestudy as it enabled a comparison to be made between the relationships of ‘domestic’ and‘international’ textile suppliers and their customers. Examining the relationships of the twotypes of firm also gave the opportunity to explore the impact of customer relationships on theinternationalisation process and repositioning of UK textile suppliers.

MethodologyResearch ProcessThe exploratory research covered five semi-structured interviews with textile suppliers. Theinterviews focused on suppliers as it seemed appropriate to gain an understanding of the keyissues facing small manufacturers before discussing them in the context of complexrelationships with major, powerful UK retailers and other network actors. The companiesinvolved in the exploratory research were chosen on the basis of their involvement in theclothing fabric / garment manufacture industry and, where possible, by identifying theirinvolvement in buyer-dominated relationships where an asymmetrical balance of power infavour of retail customers exists or had existed in the past. Each company hadinternationalised to a different extent, hence differences in their strategy, positioning andfuture goals could be reflected upon in the light of their distinct international businessexperience.

Interviews and RespondentsExploratory qualitative research was conducted between September and November 1999.Five semi-structured interviews, of 1 1/2 to 2 hours each in length, were conducted withdirectors or managers of textile industry suppliers, each having some responsibility for orexperience of developing customer relationships and / or international markets. Theserespondents comprised 1 Sales Manager, 1 Commercial Manager, 1 Commercial Director, 1Marketing Director, 1 Managing Director for Global Retail Supply and one ProductionManager. This range of respondents highlights the diverse range of company personnel that

may be involved in customer relationships from company to company and presents achallenge in comparing their responses considering their range of experience and functionalbackgrounds.

Discussion IssuesThe pilot interviews were designed and conducted with the aim of exploring and gaininginsight into the position of UK textile suppliers and establishing the relevance of the researchquestions posed and issues developing around this pilot study. The issues explored in theseinterviews included:

§ characteristics of current relationships with customers and suppliers§ experience of foreign markets§ current network position§ future strategy and positioning in domestic and foreign markets

These issues were seen as important considerations in determining the companies’ levels ofinvolvement and experience in foreign markets and in seeking to understand the range ofrelationships that each company currently held, together with their views of possible optionsfor future development and positioning. All interviews were recorded and transcribed and thequalitative data from interviews was analysed in relation to the initial research questions thatguided the pilot study. The findings of these interviews will be used as the basis fordeveloping the methodology for subsequent research and in guiding the development ofresearch questions for the following stage of the study.

LimitationsInitial problems were encountered in the study when contacting very small firms in engagingthem in discussions on the purpose of the study. Feedback from these small firms highlightedthe problem of facing so many day to day issues that needed attention that they had difficultyfinding time to be interviewed. This appeared to be particularly prevalent in the case of smallfirms dealing with large UK retail firms. Limitations were faced in the particular interview ofCompany D (see profile below). The Company D respondent replaced the ManagingDirector, who was the target respondent, and therefore did not feel in a position to respondfreely to some questions posed regarding the future of the firm. Furthermore, the interviewwas cut short as the respondent ran out of time. No problems were faced in other interviewsas larger firms were very responsive and keen to take part in the project as they appeared tofind the issues under discussion relevant and timely given current changes taking place in theindustry.

Company ProfilesThe five companies interviewed in the pilot study represented a cross-section of suppliers inthe UK textile industry. They represented firms involved in a range of textile manufacturingactivities (jersey clothing, leisure/ corporate wear, fine suiting cloth, quality ladies, men’s andchildrenswear) and different company sizes and industry experience. The firms alsorepresented a spread across different stages of the development of an international marketpresence, with one being focused solely on the domestic market and the others having a rangeof international business involvement in terms of market spread and experience. Thecompanies also ranged in the type of relationships that they had developed with majorcustomers. Three of the five were suppliers to major retail groups in the UK. One had adispersed range of domestic and international customers and one was involved with a veryfocused group of large design house customers across a wide range of international markets.

The companies’ positions ranged from those competing at the domestic medium-value end ofthe market in fiercely competitive situations, to one company supplying premium productswith an established position across many international markets.

Company A ProfileInterviewees: Marketing and Business Development Director,

Managing Director for Global Retail Supply

Major supplier to one large UK based retailer which has had a previously strong but nowdeclining profile in UK ladies, men’s and children’s wear. Relationship with this retailer hasexisted for more than 60 years with the supplier consistently positioned as one of the top fourUK suppliers to this retailer. 40% of supplier’s business is in serving this customer, whilst60% is in internationally recognised own brands selling in concessions in major internationaldepartment stores across 20 countries in Europe and North America. UK production occurs inCompany A’s wholly owned factories, whilst international brand production is sourced fromaround the world. Several days following the interview, the sole UK customer withdrew allbusiness from Company A resulting in a critical situation of factory closures and job lossesacross Company A’s domestic business and adding impetus to some of theinternationalisation, relationship and positioning issues discussed in the interview.

Company B ProfileInterviewee: Production Manager

Two hundred and twenty five year old textile manufacturer located in the south west ofEngland. In early years of 20th century the company supplied the army through the Ministryof Defence in the UK and invented ‘flannel’. In the post-war era the company supplied majorUK retailers, primarily Marks and Spencer producing high volume standard bulk fabrics.During the 1970’s and 1980’s the company changed direction and withdrew from its previouscustomer base. It now focuses on developing luxury suiting fabrics of 100% wool orwool/cashmere blends for men’s and ladies wear. Until the 1980’s the company wasvertically integrated, through spinning, weaving and the production of finished fabrics.However they have since rationalised the business and now only finish the fabrics and are notinvolved in spinning. The company is currently positioned as an internationally renownedsupplier of major international design houses, supplying fine suiting fabric to a select rangeof design houses serving independent high income level global customers.

Company C ProfileInterviewee: Commercial Manager

This company is situated in the Midlands and is a young textile supplier by general industrystandards, having been in operation for 15 years. It specialises in the development andmanufacture of jersey fabrics and garments for several major UK retailers. The company isvertically integrated with its own operations for dyeing and finishing. In terms of markets, itis currently purely domestically focused but is interested in developing internationally in thefuture.

Company D ProfileInterviewee: Sales Manager

Located in the South West of England this company previously manufactured and suppliedladies and men’s wear to major retail groups. With increasing pressure from these customersto cut costs the company recently withdrew from this market and now supplies corporatetextile products to customers in a range of diverse industries such as automotive, hotel andleisure, food and drink and information technology. The company has several internationallybased customers and is keen to develop further international customer relationships in itsareas of supply expertise.

Company E ProfileInterviewee: Commercial Director

The company is a manufacturing subsidiary of a large textile firm operating from its base inthe Midlands. The UK/export sales split is 97% UK and 3% export. UK manufacturingaccounts for 60% of output but foreign manufacturing is growing steadily and currentlyaccounts for 40% of output. The company is a major supplier of jersey fabric to garmentmanufacturers which supply Marks and Spencer. Marks and Spencer’s influence is such thatit often specifies the material inputs to its products and thus has a close working relationshipwith the company as well as the garment manufacturers. As part of a larger group, 50% of thecompany’s finished product supplies group customers, which are garment manufacturerssupplying M&S. Another 30% supplies three other major UK M&S suppliers, with theremaining 20% supplying non-M&S business. The company believes it has benefited fromthe recent rationalisation in M&S’s supply base and believes it has a sound future incontinuing to supply M&S whilst being flexible enough to change according to their needsand requirements.

FindingsThe following table compares responses from all companies on major issues discussed duringthe interviews.

Issues CompanyA

CompanyB

CompanyC

CompanyD

CompanyE

CurrentLevel ofInternationalisation

Domestic with some whollyowned foreign operations.Customers- UK sole majorretail customer.International brands sold inCanada, Northern Europe,Scandinavia. “The UK isclosing down at a rapid rateof manufacturing units”

Exports over 70% of product.UK manufacturing base.Customers- Design housesUSA, Italy, Germany, Holland,Japan, Greece. Operatinginitially through directexporting via agents, thencustomers target company assupplier as reputation built.

Domestic marketonly

Exports 10% ofproduct.Outsourcingfinished garmentsfrom UK and arange of foreignlocations.Supplying severalEuropeancustomers.Seeking to extendinternationalscope.

Exports 3% ofproduct.Sourcing yarnandmanufacturingin Far East.Supply a fewEuropeanlingeriecustomers.“Rapid declinein Europeanindustry”.

FutureInternationalisationgoals

Aiming for a “globalsourcing operation...tointernationalise rapidly in 2to 3 years. Textiles are somuch slower than manyindustries. We are just nowmoving out of the UK”

Extending scope and level ofinvolvement with currentcustomers. Establishingrelationships in emergingmarkets in Eastern Europe andFar East.Aim to be one of top suppliersto international and domesticmarket based design houses.

Extending scope ofinvolvement withcurrent customersand establishingrelationships withfurther UKretailers.

Internationalmarkets expectedto offer furtheropportunities infuture.

Proactiveinternationalsourcing.Morocco is nowconsidered to be“home”manufacturing .

Catalyst toInternationalisation

Customers. Slow rate ofinternationalisation becauseof “attachment” to majorUK customer.Situation of UK customerhas now forced quick move

Customer pressure in previousmarkets, new companymanagement, changes instructure of some areas of themarket with internationaldesign houses gaining

Nointernationalisationplanned, butopportunity infuture possiblythrough indirect

Opportunity tosupplyinternationalcustomer.

UK customerswill drive futuredirectiontowardsincreasingforeign

to international customerbase.

prominence. Development ofone influential internationalrelationship led to others.

involvement bystoring andrefurbishinggarments forforeign goodsentering UK.

manufacturingto reduce costs.

Characteristics ofCurrent CustomerRelationships

UK: “forcing”“controlling”International Brand:“flexible”, “value”,“cache”

“personal level”, “meeting anddeveloping”“keep building therelationship”“finding out their needs”“exclusive relationship”

“demanding”“conditionalrelationships”“tailored to suitcustomer needs”

Customerrelationships builton “word ofmouth” and“reputation“ withinfluentialcustomers.

“brutal”“dictates priceand strategy”“powerful”

Customers’Influence

“Complete influence”throughout network ofsupplier, manufacturer,consumer. Running ofbusiness in key areas suchas quality, design, price.Control productdevelopment process.Control over choice offabric supplier.

Shape and direction of themarketsinfluence on designs, trends,colours in the whole marketfew customers..ourdependence level is quite high

Influence entiresupply chain, day today running ofbusiness and futurestrategy. Controlover UK businessdirection but cannothinder company’sinternationaldevelopment.

Positivelyinfluence abilityof firm to developnew relationshipsthroughassociation andreputation.

Influence directrelationshipswith customersand suppliersthroughimposingsources ofsupply.Indirectlyinfluence co.throughcontrollinggarment manfs.“Pushing theindustryoffshore”.

Continuation ofCustomerRelationships

Retail: meeting theperformance criteriaBrands:

Continuous designimprovement. Maintaininggood relationships with

Dependent on fasterresponse &continuously

A good workingrelationship.Loyalty on both

New productinnovation, rightprice, quality

personal contacts,relationship building, NPD

customers. Good dialoguebetween buyer and sales &marketing and designers.

decreasing leadtimes. Expectsmaller orders morefrequently supplied.

sides. and delivery.Having UKmanufacturingbase.

Power & Control inCustomerRelationships

Asymmetrical balance ofpower & control in favourof retailer

Manufacturer has control to agreat extent- can demandasking price, few competingalternatives in the market.Customers sourceinternationally-possible threat.

Asymmetricalbalance of powerheavily in favour ofretailers

“We are notdominated at all”

“M&S has amassive holdover us”

Characteristics ofSupplierRelationships

Relationships with 10 keyraw mat’s suppliers.Brands: source garmentsfrom 100 internationalsuppliers. “Country hop onprice”Retail: wholly owned UKfactoriesManufacturer exertspressure on raw mats/fabricsuppliers to meet retailer’sstandards. Lower control asno supplier has only onecustomer.

Relationships with 2 or 3major suppliers for over 20years. Seek high quality yarnat good price.TrustReliable

Verticallyintegratedoperation, butcustomer pressureshave effect ofpressure passeddown supply chain.

Broad spectrumof supplierrelationships.

“Familynetworks” inforeign marketsused to sourceother suppliers.Relationshipswith suppliershave been builtup and havegrown.Reliability and“personal touch”important.

Suppliers’ Influence Timing of delivery/qualityof supply influencesperformance of manf.Supp. relationships movingfurther towards ad hoc, notlong term. Could bedeveloped internationally

Understanding of the market.International location andstatus e.g. Italy design focusedand at heart of Europeanindustry.

Verticallyintegrated supplyplays important rolein meeting retailers’fabric developmentrequirements.

Broad supplierbase allows forflexibility andkeeping abreastof new product s.

Help “defend”co. throughinnovation inyarns and fabricfinishes.

given adequate quality.Constraints toreaching desiredfuture Position

Competition and lack ofinternational connections.

Current customer relationshipscould restrictdevelopment of relationshipswith direct competitors ofcustomers or those with lowerquality products.

Internal constraintsto meeting demandsof retailers.Increasing UK andinternationalcompetitiveconstraints.

N/A With increasedforeigncompetition,have to providecompetitiveadvantages otherthan location.

Determinants of aChange in Position

By internationalising andincreasing customer base.Becoming less visible toattack when a retailerdeclines or withdrawsbusiness.

By building strongrelationships with the 5-10 keyplayers. Supplying all of them,being on their list of topsuppliers. Having suchinfluence that they seek out thecompany, visit and placeorders.

Tied to goals set byretailers forsupplier - greaterflexibility,improved deliverytimes.

N/A Strongrelationshipswith UKretailers whichwere prepared towork with co.through changes.

Achievement ofChange in Position

Achieving market share,turnover and profit targetsby country/region.Becoming less visible toattack when a retailerdeclines or withdrawsbusiness.

Through increasedinternational market presenceand turnover. Design andmarketing staff with networkcontacts.

Through beingopen to changesrequired by retailer.Companypermitting itself tobe dictated to byretailer.

N/A By moving withcurrent customerbase andresponding tochanges thatcustomers wantto make e.g.increasedforeign sourcingof raw materials.

Influence of buyer-dominatedrelationships oncompetenciestransferable tointernational markets

Influence on design andquality development.Manufacturing capability.Financial credibility.

Influence on fabrictechnology.

Influence ondesign, productdevelopment,marketing.

N/A Influence onprocesses,controls,systems andstandards.

Discussion of FindingsInternationalisationBy viewing the involvement in international activity across the five firms it is possible todivide them into two groups, namely those involved in domestic relationships with UK retailcustomers and those involved in international customer relationships. This distinction isuseful as it allows a comparison of the positioning of firms that have been able to break intointernational networks with those that are predominantly involved with domestic customers.By comparing the relationships and positioning of the two types of firm it may be possible toidentify some important areas where the domestic firms can learn from the experience ofthose that have gone through the process of developing an international network position.

The Domestic FirmsThe UK focused companies had put the majority of their resources and efforts intomaintaining their relationships with UK customers such as Marks and Spencer, Next andBHS. Their interests lay largely in developing these relationships as they appeared to lack theskills, experience and knowledge to develop international relationships. The focus on thesedomestic market relationships highlighted the dilemma of these firms -an awareness of theneed to develop new international customer relationships whilst being frozen in their currentposition by an inability or unwillingness to do so. The domestic firms were aware of the needfor international supplier and customer relationships, with even their domestic customerspushing them to develop international sources of supply. However, despite recognising theneed to develop a wider range of relationships across more markets they were unable orunwilling to shift resources away from current customers to focus on developing the skillsand knowledge required to develop new relationships.

There was evidence of a belief that UK retailers would not break their ties with thesesuppliers because of the length of time that these relationships had lasted. An “ostrich”mentality of burying one’s head in the sand was evident. Suppliers such as A, C and E aimedto focus efforts on maintaining current relationships with customers by being responsive totheir requirements and being prepared to make adaptations in the hope that customers wouldnot break ties with such flexible, long-held suppliers.

The International FirmsThe internationally focused firms, B and D each had very different profiles, but despite thedifferences their behaviour and approach to internationalisation and customer relationshipswas remarkably similar.

Supplier B, which supplies luxury suiting fabric to international design houses, hadinternationalised during the 1980s and had developed strong international relationships inEurope and USA. The company had made a conscious decision to break out of previousrelationships with UK retailers and focus on developing new types of international customerrelationships with a wider spectrum of customers where the focus was on quality rather thanprice and the relationships were “mutual” i.e. having shared goals and compatible aspirations(Ford, Håkansson and Johanson, 1986).

Despite operating at the lower end of the market, Supplier D had also been able to divergefrom its previous buyer-dominated relationships with UK customers and focus on building alarger variety of less “intense” relationships i.e. a lower level of contact between firms withlower level of resource exchange (Ford and Rosson, 1982). It seemed that by changing itsrole in the network from one of manufacturer to outsourcing production, focusing on tightly

managing a range of international supplier relationships, Supplier D appeared to now performthe role of a service function for its customers.

This section has highlighted the different types of relationships that the firms had, dependenton whether their focus was on domestic or international customers. The following sectionwill explore the characteristics of these relationships and attempt to identify the differencesbetween the relationships of the domestic and international firms.

Characteristics of Buyer-Supplier RelationshipsMutuality and IntensityThe major differences between the relationships of the two firms that had broken out ofdomestic relationships and those that remained embedded in domestic relationships appearedto lie in the mutuality and intensity of the relationships. Supplier B and D’s relationshipsdiffered from the domestic-orientated firms by having a range of international relationshipswhich, however, apparently varied in terms of mutuality and intensity (see table 1.).

Table 1. Mutuality and Intensity Matrix Showing Positions of ‘Domestic’ and‘International’ Firms

MutualityLow High

Low Domestic FirmsSupplier ASupplier CSupplier E

International with WideCustomer Relationships

Supplier D

High International withNarrow CustomerRelationships

Supplier B

The relationships of Supplier B with customers involved high levels of interaction andinvolvement by the supplier and customer in each others business and high mutuality in termsof being prepared to make sacrifices or be flexible for the sake of the other firm -“collectivegoals or common interests” (Ford, Håkansson and Johanson, 1986). This was demonstratedby Supplier B’s customers’ being prepared to wait for particular fabrics to be manufacturedand both parties being flexible on price. This behaviour differed greatly to that of the UKretailers which “dictated” prices and lead times to suppliers and where no mutuality existed.The relationships of Supplier B and its design house customers were “intense” in that a veryhigh level of contact existed between the customer and supplier across a range of differentactors within each firm. Resource exchange was common and existed in the form of staff,technology and knowledge. For example, staff from Supplier B and customer companieswould frequently visit each other’s plants to learn about new manufacturing techniques,products or to work together on projects. These visits were viewed very positively as being a

Intensity

learning opportunity which would have a positive outcome for both firms and develop theirrelationship.

Supplier D had reduced the level of intensity in the relationships with its customers, in mostcases, in comparison with its previous relationships with UK retailers. As the manufacture ofits products was outsourced, the firm had focused its resources on building a largeinternational customer base of flexible relationships and supplying these customers often onan ad hoc basis. Relationships displayed elements of high mutuality as customers dipped inand out of their relationships with the firm but were prepared to be flexible in terms ofproduct specifications and delivery dates in order to be uncompromising on quality andbecause there was a level of trust between the two firms.

Power and DependencyPower and dependency are important distinguishing factors between the situations of thedomestic and international firms. The domestic firms’ relationships all displayedcharacteristics of asymmetrical power balance in favour of UK retailers with the suppliersexperiencing loss of control in the relationship and dependence on the retailer for decision-making such as which sub-supplier should be used. Future opportunities and direction wereinfluenced by the customer in areas such as internationalisation and development of newcustomer and supplier relationships. For example, Supplier A had been told by Marks andSpencer that it must develop international sources of supply in order to retain its status as apreferred supplier and was dissuaded from seeking new customers by the threat ofdiscontinuation of its M&S relationship.

The international firms, Supplier B and Supplier D, displayed very different characteristicswith regard to power and dependency in their customer relationships. Both professed to alack of domination on the part of their customers and appeared to be in control as much as thecustomer of the development of both current and new relationships. With its large customerbase, Supplier D had a wide range of alternative relationships in place which gave it thefreedom to choose to interact with customers that did not exert pressure on the firm. SupplierB was in a position where there were “few competing alternatives” to its design andtechnology-intensive products meant that customers sought out the company.

The distinction between the relationship characteristics of intensity, mutuality and power-dependence of the domestic and international firms has highlighted the differences incustomer relationships between these two types firms. Figure 2. illustrates the differences inthe relationships between ‘domestic’ firms and their customers and ‘international’ firms andtheir customers.

Figure 2. Characteristics of Domestic and International Supplier-CustomerRelationships

COUNTRY ADOMESTIC SUPPLIER

• lack of mutuality• low intensity in one/few

domestic relationships• lack of power/control• lack of distinctive internal

knowledge/competencies• lack of relationship

knowledge

COUNTRY ADOMESTIC CUSTOMER

• lack of mutuality• low intensity across wide

choice of similar domestic/international suppliers• power and control over

suppliers

COUNTRY A INTERNATIONAL SUPPLIER• mutuality• less intense relationships with many customers

OR• more intense relationships with few customers• equality in power/control• distinctive internal knowledge/competencies• relationship knowledge

Determinantsof a change inposition?

COUNTRY BINTERNATIONAL CUSTOMER

• mutuality• reliance on supplier for distinctive

internal knowledge/competencies• equality in power/control

In the following section the positioning of the two types of firms will be compared with theaim of understanding how the international firms have developed new international networkpositions.

Establishing a Change in Network PositionThe study examined two types of firm -a) those that had developed new relationships and changed their position from one of supplierto domestic market customers to one of having established a new network position assuppliers to international customersb) those that had retained their domestic supplier position.

The ability to establish a new network position appears to have been influenced by severalfactors Firstly, the two firms that had broken into new networks had purposely made thedecision to seek out new relationships and had ideas about the characteristics that theyrequired these new relationships to possess. The firms had wanted to gain an element offlexibility in their relationships in the sense of having a wider choice of customers. It wasimportant that they were not dominated by customers in these relationships and that they hadsome control over how the relationships developed. Furthermore, the firms appeared to havesought to develop some ‘relationship knowledge’ or an understanding of how to deal withand behave towards new sets of customers. The relationship knowledge also appeared to playan integral part in the internationalisation of the firms, as learning about behaviour in newcustomer relationships invariably involved becoming linked to customers with internationalconnections. However, the most critical factor in breaking into a new network appeared to bethe relationship knowledge, rather than the knowledge of international markets and thegeographic location of customers.

Relationship knowledge seemed to be lacking in the suppliers that were still reliant on a fewkey relationships with UK retailers as they expressed concerns over their inexperience in newtypes of customer relationship despite several having researched international markets. Thisappears to indicate that market knowledge must be combined with relationship knowledge inbreaking into new international networks.

ConclusionsThe study attempted to answer questions related to whether firms could change networkposition and how their previous position would influence their ability to internationalise andestablish a new network position. The findings of the study have indicated that therelationship characteristics differed between the ‘domestic’ and ‘international’ firms and thatthese characteristics had an impact on the ability of the firms to implement their ownrelationship strategy, as opposed to having a strategy imposed upon them by customers. Thekey differences lay in the mutuality, intensity and control of relationships as outlined inFigure 2.

The findings suggested that a key factor in establishing new relationships leading to a changein network position related to the development of internal changes that take place inorganisations in areas of learning or acquiring knowledge about relationship skills. This‘relationship knowledge’ requires further investigation with regard to its component parts or

elements and in relation to the role that it plays in the ability of firms to internationalise anddevelop a new network position.

Future avenues of research relate to further investigation of the differences in relationshipcharacteristics between ‘domestic’ and ‘international’ firms and their customers and inexploring how firms develop and implement relationship knowledge, together with anexamination of the role of relationship knowledge in positioning in international networks.

Emergent Questions§ How do small and medium-sized textile suppliers acquire and implement the knowledge

to develop new customer relationships?§ What are the key elements of this ‘relationship knowledge’?§ How does ‘relationship knowledge’ contribute to the ability of small and medium-sized

textile suppliers to develop an international network position?

ReferencesEaston, G. (1992) “Industrial Networks: A Review”, In : “Industrial Networks: A New Viewof Reality”, Axelsson B. and Easton G. (Eds.), London, Routledge pp. 3-27

Ford, D. (1980) “The Development of Buyer-Seller Relationships in Industrial Markets”,European Journal of Marketing, 14 (5/6), 339-354

Ford, D., Håkansson, H. and Johanson, J. (1986) “How Do Companies Interact” IndustrialMarketing and Purchasing, 1(1), 26-41

Ford, D. and Rosson, P. (1982) “ The Relationships Between Export Manufacturers and theirOverseas Distributors” in Export Management, Praeger, New York, pp. 257-75Håkansson, H. and Snehota, I. (1995) “Developing Relationships in Business Networks”,London, International Thomson Business Press

Holmlund, M. and Kock, S. (1997) “Relationships and Internationalisation of Finnish Smalland Medium Sized Companies”, International Small Business Journal, Issue 64

Johanson, J. and Mattsson, L.G. (1992) “Network Positions and Strategic Action”, InIndustrial Networks: A New View of Reality, London, Routledge pp. 205-214

Johnsen, R. and Ford, D. (1999) “ Changing Network Position Through Internationalisation”,Paper presented at the 15th Industrial Marketing and Purchasing (IMP) Conference, UCD,Dublin, Eire

Marrett, C.B. (1971) “On the Specification of Interorganizational Dimensions”, Sociologyand Social Research, 56, pp. 83-99

Mattson, L-G (1984) “An Application of A Network Approach to Marketing: Defending andChanging Market Positions” in N. Dholakia and J. Arndt (eds.) Changing the Course ofMarketing. Alternative Paradigms for Widening Marketing Theory, Greenwich, Conn., JAIPress

Mattson, L-G. (1986) “Indirect Relationships in Industrial Networks : A Conceptual Analysisof their Significance”, Paper presented at the 3rd Industrial Marketing and Purchasing(IMP) International Seminar, IRE, Lyon, France

Mintzberg, H. and Waters, J.A. (1985) “Of Strategies Deliberate and Emergent”, StrategicManagement Journal, 257-272

Mintzberg, H. and Quinn, J.B. (1992) “The Strategy Process”, Englewood Cliffs, PrenticeHall

Mintzberg, H. and Waters, J.A. (1985) “Of Strategies Deliberate and Emergent”, StrategicManagement Journal, 257-272

Seyed-Mohamed, N. and Bolte, M. (1992) “Taking a Position in a Structured BusinessNetwork”, In: Managing Networks in International Business, Forsgren, M. and Johanson, J.Amsterdam, Gordon and Breach : pp. 215-231